Novodit earns 10% on his investments in equity shares. He is considering a recently floated scheme of a Mutual Fund where the initial expenses are 6% and annual recurring expenses are expected to be 2%. How much the Mutu

CS Executive · Capital Markets & Securities Laws · PYQS · June 2021
Novodit earns 10% on his investments in equity shares. He is considering a recently floated scheme of a Mutual Fund where the initial expenses are 6% and annual recurring expenses are expected to be 2%. How much the Mutual Fund Scheme should earn to provide a return of 10% to Novodit?

Answer & Explanation:

Earning of Novodit on his investment on Equity Shares = R 1 Mutual fund earning = R 2 R 2 = [1 / (1-initial expenses) x R 1 ] + recurring expenses The rate of return the mutual fund should earn = [1 / (1-.06) x 0.1] + 0.02 = 0.1264 or 12.64%

Topics: Mutual Funds

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